Britain’s economy ‘running on empty’ as recession fears grow

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Britain’s economy ‘operating on empty’ as fears grow over a worldwide recession, consultants warn

The  economy is ‘running on empty’ as fears grow over a worldwide recession, consultants warned yesterday.

Businesses are the gloomiest they’ve been about their progress prospects since May 2020, in accordance with information supplier S&P Global. At the identical time, exercise within the manufacturing sector is at a 23-month low.

The slowdown is echoed world wide – fuelling fears of a worldwide droop as inflation soars and rates of interest rise.

Slowing: UK firms at the moment are essentially the most gloomy they’ve been about their progress prospects since May 2020, in accordance with information supplier S&P Global

US factories reported their first drop in output for 2 years, as the cost-of-living disaster bites.

And excessive costs within the eurozone meant demand for manufactured items fell on the quickest fee since May 2020 through the depths of the Covid disaster.

Back within the UK, buyer demand was ‘subdued’, in accordance with S&P, as red-hot inflation prompted companies and shoppers to tighten their purse-strings.

Chris Williamson, chief business economist at S&P Global Market Intelligence, mentioned: ‘The economy is starting to look like it is running on empty. 

Current business growth is being supported by orders placed in prior months as companies report a near-stalling of demand.

‘Manufacturers in particular are struggling with falling orders, especially for exports, and the service sector is already seeing signs of the recent growth spurt from pent-up pandemic demand move into reverse amid the rising cost of living.’

Such low ranges of confidence have ‘in the past typically signalled an imminent recession’, Williamson added.

The pound, which has already tumbled round 9 per cent in opposition to the greenback to this point this 12 months, fell again beneath $1.22 earlier than paring its losses. 

Rising costs world wide, prompted by Russia’s invasion of Ukraine and provide chain chaos attributable to Covid, are taking their toll on economies which had been solely simply recovering from Covid pandemic lockdowns.

Jack Allen-Reynolds, at Capital Economics, mentioned the information from the eurozone ‘showed a further slowdown in the services sector, while output in the manufacturing sector now seems to be falling outright’.

But with costs nonetheless rising, he added: ‘The eurozone appears to have entered a period of stagflation’. 

This is a worrying prospect for households, as it usually includes a interval of decrease unemployment and falling residing requirements.

Jerome Powell, chairman of America’s central financial institution the Federal Reserve, has acknowledged {that a} recession within the US is ‘certainly a possibility’.

There was some trigger for optimism within the UK, as the providers sector – which covers every part from eating places to banking – remained ‘resilient’, in accordance with S&P.

But S&P added that many providers companies ‘also cited growth headwinds from the cost-of-living crisis and heightened economic uncertainty’.

And separate figures from information agency GfK signalled that the resilience might not final for lengthy, as shopper confidence in June fell to its lowest degree since information started in 1974.

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